Introduction to Excepted Benefit HRA
An Excepted Benefit HRA is a type of health reimbursement arrangement that allows employers to reimburse employees for certain medical expenses, such as copays and deductibles, without being subject to the Affordable Care Act's market reforms.
To qualify as an Excepted Benefit HRA, the arrangement must meet specific requirements, including being offered in conjunction with a group health plan and limiting reimbursements to excepted benefits.
Eligibility and Participation Rules
To be eligible for an Excepted Benefit HRA, employees must be enrolled in a group health plan that provides minimum essential coverage, and the HRA must be offered on a uniform basis to all similarly situated employees.
Employers must also ensure that the HRA is not used to reimburse expenses related to a group health plan that is not a qualified high-deductible health plan.
Reimbursement and Contribution Limits
The IRS has established specific limits on the amount of reimbursements that can be made under an Excepted Benefit HRA, and employers must ensure that these limits are not exceeded.
Additionally, employers must ensure that contributions to the HRA are made on a pre-tax basis, and that employees are not required to pay premiums or other costs associated with the HRA.
Documentation and Disclosure Requirements
Employers must maintain accurate records of HRA reimbursements and contributions, and must provide employees with clear and concise disclosures about the terms and conditions of the HRA.
This includes providing a summary plan description and a summary of benefits, as well as notifying employees of any changes to the HRA or the underlying group health plan.
Compliance and Enforcement
The IRS and other regulatory agencies closely monitor compliance with Excepted Benefit HRA rules and requirements, and employers that fail to comply may face significant penalties and fines.
To avoid these risks, employers should work closely with a qualified benefits advisor or attorney to ensure that their HRA is properly designed and administered.
Frequently Asked Questions
What is an Excepted Benefit HRA and how does it work?
An Excepted Benefit HRA is a type of health reimbursement arrangement that allows employers to reimburse employees for certain medical expenses, such as copays and deductibles, without being subject to the Affordable Care Act's market reforms.
What are the eligibility requirements for an Excepted Benefit HRA?
To be eligible for an Excepted Benefit HRA, employees must be enrolled in a group health plan that provides minimum essential coverage, and the HRA must be offered on a uniform basis to all similarly situated employees.
How much can an employer contribute to an Excepted Benefit HRA?
The IRS has established specific limits on the amount of reimbursements that can be made under an Excepted Benefit HRA, and employers must ensure that these limits are not exceeded.
What documentation and disclosure requirements apply to Excepted Benefit HRAs?
Employers must maintain accurate records of HRA reimbursements and contributions, and must provide employees with clear and concise disclosures about the terms and conditions of the HRA.
What are the consequences of non-compliance with Excepted Benefit HRA rules and requirements?
Employers that fail to comply with Excepted Benefit HRA rules and requirements may face significant penalties and fines, and may also be subject to regulatory action by the IRS and other agencies.
How can employers ensure compliance with Excepted Benefit HRA rules and requirements?
To ensure compliance, employers should work closely with a qualified benefits advisor or attorney to design and administer their HRA, and should regularly review and update their HRA to ensure that it remains compliant with applicable laws and regulations.